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Part Four Objectives and Budgeting for Integrated Marketing
Communications Programs
Belch: Advertising and
Promotion, Sixth Edition
IV. Objectives and
Budgeting for Integrated
Marketing
Communications Programs
7. Establishing Objectives
and Budgeting for the
Promotional Program
© The McGraw−Hill
Companies, 2003
advertising area. The agency position is that promotional monies are harder to track in
terms of effectiveness and may be used improperly if not under its control. (In many
cases commissions are not made on this area, and this fact may contribute to the
agency’s reluctance.) 39
The orientation of the agency or the firm may also directly influence where monies
are spent. Many ad agencies are managed by officers who have ascended through the
creative ranks and are inclined to emphasize the creative budget. Others may have
preferences for specific media. For example, BBDO Worldwide, one of the largest
advertising agencies in the United States, has positioned itself as an expert in cable TV
programming and often spends more client money in this medium. McCann-Erickson
is spending more monies on the Internet. Both the agency and the client may favor certain
aspects of the promotional program, perhaps on the basis of past successes, that
will substantially influence where dollars are spent.
Market Size While the budget should be allocated according to the specific promotional
tools needed to accomplish the stated objectives, the size of the market will
affect the decision. In smaller markets, it is often easier and less expensive to reach the
target market. Too much of an expenditure in these markets will lead to saturation and
a lack of effective spending. In larger markets, the target group may be more dispersed
and thus more expensive to reach. Think about the cost of purchasing media in
Chicago or New York City versus a smaller market like Columbus, Ohio, or Birmingham,
Alabama. The former would be much more costly and would require a higher
budget appropriation.
Market Potential For a variety of reasons, some markets hold more potential
than others. Marketers of snow skis would find greater returns on their expenditures in
Denver, Colorado, than in Fort Lauderdale, Florida. Imported Mexican beers sell better
in the border states (Texas, Arizona, California) than in the Midwest. A disproportionate
number of imported cars are sold in California and New England. When
particular markets hold higher potential, the marketing manager may decide to allocate
additional monies to them. (Keep in mind that just because a market does not
have high sales does not mean it should be ignored. The key is potential—and a market
with low sales but high potential may be a candidate for additional appropriations.)
There are several methods for estimating marketing potential. Many marketers conduct
research studies to forecast demand and/or use secondary sources of information
such as those provided by government agencies or syndicated services like Dun &
Bradstreet, A. C. Nielsen, and Audits and Surveys. One source for consumer goods
information is the Survey of Buying Power, published annually by Sales & Marketing
Management magazine. The survey contains population, income, and retail sales data
for states, counties, metropolitan statistical areas, and cities in the United States and
Canada with populations of 40,000 or more.
Market Share Goals Two studies in the Harvard Business Review discussed
advertising spending with the goal of maintaining and increasing market share. 40 John
Jones compared the brand’s share of market with its share of advertising voice (the
total value of the main media exposure in the product category). Jones classified the
brands as “profit taking brands, or underspenders” and “investment brands, those
whose share of voice is clearly above their share of market.” His study indicated that
for those brands with small market shares, profit takers are in the minority; however,
as the brands increase their market share, nearly three out of five have a proportionately
smaller share of voice.
Jones noted that three factors can be cited to explain this change. First, new brands
generally receive higher-than-average advertising support. Second, older, more
mature brands are often “milked”—that is, when they reach the maturity stage, advertising
support is reduced. Third, there’s an advertising economy of scale whereby
advertising works harder for well-established brands, so a lower expenditure is
required. Jones concluded that for larger brands, it may be possible to reduce advertising
expenditures and still maintain market share. Smaller brands, on the other hand,
have to continue to maintain a large share of voice.